How Contractor’s Licenses Protect Homeowners and Contractors

How Contractor’s Licenses Protect Homeowners and Contractors

Updated on December 5, 2019

Knowingly or unknowingly many homeowners enter into agreements with unlicensed contractors to renovate their homes because unlicensed contractors often provide the least expensive proposal. Similarly, many contractors never obtain a license because it increases their overhead and burden. But in doing so homeowners and contractors alike are being, “a penny wise, a pound foolish”.

From the Homeowner’s Perspective:

Pursuant to California Business and Professions Code Section 7071.6 the Contractors State License Board (“CSLB”) requires a bond be posted before any license is activated, reactivated or renewed. At present, the CSLB requires a bond in the amount of $15,000 and that it be issued by a surety company licensed through the California Department of Insurance. This bond requirement was put in place as a safeguard against defective construction work, amongst other construction related issues. It seeks to remedy such situations as a home remodel gone awry and the contractor does not have the assets to reimburse the homeowner for fixing the defective work. While often times the cost of repair for the defective work greatly exceeds $15,000 it at least provides the homeowner with some degree of assurance and monetary relief. It’s also a significant indication that the contractor is familiar with the other laws governing construction work in California, such as building codes and other safety requirements.

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From the Contractor’s Perspective:

Pursuant to California Business and Professions Code Section 7031 unlicensed contractors are strictly barred from suing to collect any unpaid fees for construction work they performed. Conversely, under the same law, homeowners are granted the right to sue for reimbursement of all fees paid to an unlicensed contractor regardless of the quality of the work. The relatively small amount the contractor may save upfront on overhead and burden could be completely subsumed by a single construction project suffering from even the most minor of defects and/or any other type of falling out with the homeowner.

Additionally, pursuant to California Business and Professions Code Section 7028 it is a misdemeanor to operate without a valid contractor’s license on any construction project that exceeds $500. The first offense is punishable by either a fine not exceeding $5,000 or a jail sentence not exceeding 6 months, or both. The penalties ratchet up even further for subsequent offenses. Performing construction work without a license in the State of California is huge risk without much of any reward.

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At Schorr Law we are experienced in representing both homeowners and contractors and can help navigate and protect you in connection with a home renovation and/or any other type of construction project. To schedule a consult, please send us a message through our contact form, or give us a call at (310) 945-1877.